California Mortgage Rates Show Signs of Leveling in Spring 2022

California mortgage rates have followed a roller-coaster path over the past few weeks, rising from near record lows to their highest level in over ten years.

Now, it seems like mortgage rates in California and nationwide might be leveling off a bit. They actually declined slightly over the past two weeks or so, suggesting that the upward “spike” might be over for now.

Granted, no one can predict future mortgage rates trends with complete accuracy. There’s always a chance they could rise further as we move into the summer months, due to a number of factors. But recent forecasts suggest they might hover within their current range for a while.

Here’s an updated look at California mortgage trends as of spring 2022, along with one group’s forecast for the coming months.

California Mortgage Rates Trends: Spring 2022

What a year we’ve had in terms of mortgage rates. After hovering near historic lows for many months, home loan rates shot up by around 2% in a short period.

Here’s a recap of California mortgage rate trends since the start of 2022:

• Back in early January, the average rate for a 30-year fixed mortgage was 3.22%.
• Soon after that, rates began a steady upward climb that lasted for four months.
• By the second week of May 2022, mortgage rates had risen to a peak of 5.33%.
• The peak reached in May was the highest average since 2009.
• As of early June, 30-year mortgage rates had leveled off at around 5.09%.

The bottom line here is that California mortgage rates are higher now than at the start of the year. These trends, combined with steep home-price appreciation over the past two years, could present challenges to some home buyers in the Golden State.

Forecast: 5% the ‘New Normal’ for Home Loan Rates?

The recent uptick in mortgage rates caught some California home buyers and homeowners off guard. But they’re still fairly low from a historical standpoint.

If you go all the way back to the 1970s, 30-year mortgage rates have averaged around 7.7%. And they were as high as 16% in the early 80s. In light of that, today’s 5% mortgage rates don’t seem so high after all.

Additionally, some industry watchers believe that 30-year mortgage rates will level off in the low-5% range during 2022. For example, a May 2022 forecast issued by the Mortgage Bankers Association (MBA) predicted that home loan rates would average somewhere between 5% and 5.2% for the rest of this year.

In truth, we don’t really know how California mortgage rates will behave over the coming months. Only time will tell. But the general consensus seems to be that they won’t rise too much higher than where they are now.

Could Higher Rates Help ‘Normalize’ the Housing Market?

Higher mortgage rates are one of several factors that could cool the real estate market in 2022. Higher home prices and inflation could also play a role, as we move toward the summer months.

In their latest mortgage rate survey report, Freddie Mac’s research team wrote the following:

Mortgage rates continued to inch downward this week but are still significantly higher than last year … Heading into the summer, the potential homebuyer pool has shrunk, supply is on the rise and the housing market is normalizing. This is welcome news following unprecedented market tightness over the last couple years.

The reality is that most housing markets across the state could benefit from a cooling trend. The rapid price growth of the past couple of years is unsustainable over the long term.

The Bottom Line for California Home Buyers

Home buyers in California who plan to make a purchase later in 2022 will encounter higher costs than those who purchased last year. That’s the reality of our current real estate market. Mortgage rates in California have risen since the start of this year, and house prices have climbed as well.

On the upside, some housing analysts expect that we could see more inventory over the coming months. If more homes come onto the market, it could lead to a more balanced supply-and-demand situation. That would be a positive trend for buyers all across the state.

Need mortgage financing? Bridgepoint Funding is located in the San Francisco Bay Area but serves the entire state of California. We offer a variety of financing options, including FHA, VA and conventional loans. Please contact us with your mortgage-related questions, or to apply for a loan.